The set-up of the Open Incubation model is the first step in the incubation process of a venture. When first discussing the open incubation model, a venture team may first want to discuss the Rules of Engagement. Do we need to develop a shared view on the rules of engagement of our collaboration? Are the presented Rules of Engagement applicable to our team or do we want to adapt these rules? In my experience, it is the process of discussing the Rules of Engagement at the start of a new venture that is as valuable as the rules itself. Discussing the Rules of Engagement triggers a discussion on the purpose of the venture, the approach and the teaming requirements.
Once the rules of engagement have been agreed upon, the Contribution & Reward framework guides the venture team in finding the balance between roles, contributions and rewards of the participants and their respective roles in the venture. I recommend to start with defining the roles and contribution areas of the venture team members. This requires that the Contribution & Reward framework is transparent to the venture team. A transparent framework enables regular evaluation of the roles and contributions of the venture team members. My advice is to do this evaluation every 3-6 month. In my experience, the timing, intensity and impact of the contributions of the venture team members may vary significantly in the very fist phase of development of the venture. A more frequent evaluation does not accommodate for the timing differences of the impact and intensity of the contribution.
The last step is to discuss the rights & obligations of the participants. These rights & obligations will be outlined Venture Governance framework. Taking the roles of the venture team members as a starting point, the Founders and Founding Investors need to decide upon leadership, the level of transparency in the venture team and how to sustain the Open Incubation model over the course of the venture life cycle (from start-up to exit). The Venture Governance Framework allows the venture team members to align the venture governance with the purpose and values of the venture.
Once the venture team leadership decides to incorporate the venture, the Open Incubation model will be translated into the legal set-up of the company: the Articles of Association, the shareholders agreement, the funding structure, the cap table, the formalisation of business partnerships, the appointment of the directors, and other rewards agreed upon with the participants. As the Open Incubation model consists of frameworks with pre-defined roles, applying the Open Incubation model into legal documentation becomes relatively easy. It’s my ambition to develop templates of the legal documentation based on best practices.